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Bio: BS in Electrical Engineering from MIT. MBA in Finance/Entrepreneurship from UCLA Anderson School of Management. Previously the vice-president of business development for Feedster, a defunct blog search engine. Before that, Michels was the president of Colt HR, a provider of benefits administration software.

Chief Architect: Clay Loveless

Bio: BA from New York University’s Gallatin Division. Previously a senior software engineer at Feedster and before that, vice-president of technology at Eruptor Entertainment.

Board Members and Advisors:

Josh Kopelman, Chairman, Entrepreneur and angel investor

Clint Chao, Founding General Partner at Formative Ventures

Oren Michels, CEO and co-founder

Scott Rafer, co-founder

Funding:

$8.2 million raised in total. Seed/Series A round of funding occurred in 2006/7, led by First Round Capital, with investment from a group of angel investors. A series B round occurred in 2007, led by First Round Capital, Formative Ventures, and The Accelerator Group. An addition Series B round occurred in 2008, led by .406 Ventures, Formative Ventures, and First Round Capital.

Technology:

Mashery provides a SaaS (Software as a Service) infrastructure for managing, as well as monitoring and monetizing a company’s API. Application Programming Interfaces (APIs) are software protocols that open up a given system’s functionality or data to other computer programs. Often, a company’s API is accessible via an Internet connection, allowing 3rd party websites or mobile applications to seamlessly incorporate services or information from the originating system.

Mashery clients have access to a dashboard which allows management of day-to-day activities such as collaborating with a developer community or managing access to the API and handling security. Mashery aims to protect the client’s API by routing traffic through its web server and limiting access to the client’s servers until they have been authenticated. Mashery also provides on-demand scaling to its clients, using Amazon’s EC2 and S3 cloud computing platforms to scale rapidly, adding new server capacity in minutes as needed.

ProgrammableWeb, a service that lists APIs, currently counts more than 1,500 available APIs, up from 1,100 at the end of 2008. By publishing its API, a company gives potential and existing partners the ability to create applications that use data and engage customers beyond what the company’s motivation and resources alone would permit. Companies have the choice to either implement the API and the infrastructure around it in-house (i.e. build) or use a service like Mashery’s to manage the infrastructure (i.e. buy). Building the infrastructure in-house can be costly and it may be more difficult to scale and manage access and security in an efficient manner. By buying an infrastructure service, companies have more control of their costs and are more flexible.

Mashery is currently targetting four sectors: digital media (clients include New York Times, MTV, Guardian), retail & e-commerce (Netflix, Best Buy, CVS), business data services (Hoovers, ZoomInfo) and mobile & telecommunications (Alcatel Lucent, France Telecom). Usage models vary from private use APIs between partner companies (e.g. Netflix and Microsoft) to internal API management within a company (CBS Interactive) and public-facing APIs (Best Buy, Netflix and the New York Times).

Strategy:

Mashery is mainly targeting larger clients for which a buy decision is a better alternative to building. Mashery uses a subscription-based licensing structure which allows customers to predict monthly operating expenses.

Its business proposition is that managing an API means managing many different processes such as user registration and provisioning for not just one, but many partners, which can overwhelm most IT organizations. Mashery offers three kinds of support & service level agreement (SLA) that differ in response time and services offered: Standard, Enterprise, and Premium.

Mashery also has a product tailored to small businesses called Mashery SMB which is based on the same secure infrastructure as offered to Mashery’s enterprise customers. However, it offers less flexibility with respect to the portal design and limited support.

Challenges and Next Steps:

According to Co-Founder and CEO Oren Michels, Mashery’s biggest challenges are related to managing the fast growth of the relatively young company, both in terms of revenues and human resources.

With respect to basic API implementation services, Mashery faces competition, for example from 3scale. Similar to Mashery, 3scale’s services provide access to service management, monitoring and payments. 3scale has chosen a slightly different approach with a business model targeted to smaller companies, starting with a free plan for usage of up to 2,500 hits/day. 3scale has signed up a lot of smaller web companies, successfully competing against Mashery’s SMB program. It has recently started to target some of the larger companies, competing more directly with Mashery.

Mashery’s plan going forward is to continue to expand its client base in a fast-growing market. Industry experts expect that it will continue to get easier for companies to publish APIs, accelerating growth. Also, given the recent strong growth in mobile applications and facebook applications, the market for Mashery’s services is expected to grow as APIs are the basis for these applications.

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